China: Pork prices continue to rise

Sen Yu International Holdings, Inc., a commercial hog breeder and supplier in Heilongjiang Province, China, commented today that rising pork prices are expected to help increase breeders' profits and support growth as farmers are encouraged to replenish hog stocks and increase supply.

The average wholesale price of pork reached 24.8 yuan ($3.86) a kilogram last Tuesday, July 5, at the Beijing Xinfadi Farm Product Wholesale Market, a three-year high since the middle of 2008, according to a report from China's Global Times on July 6, 2011. The average price of lean pork between June 21 and June 30 reached 30.58 yuan a kilogram, 5.3% higher than that of June 11 to June 20. The price of pork belly rose by 5.4% during the same period, the largest increase since early February, according to data from the National Bureau of Statistics on food prices in 50 Chinese cities as of Monday, July 4, 2011.

Prices keep rising
Observers believe that pork prices will keep rising until the end of the year. Higher prices are being driven by insufficient pork stock and a pig epidemic from late 2010 to early 2011 and are also linked to an increase in the price of corn, which accounts for roughly 60% of pig feed. After the Chinese New Year, supplies of pork diminished as most stored pork was sold during this peak season. June is typically the low season for pork sales and a time to replenish pork stock, which has contributed to tightening pork supply. As the hog breeding industry requires a period of production cycle recovery, it is expected that pork prices will remain stubbornly high in the near term. Pork accounts for roughly 65% of China's meat consumption.

"In the near term, higher pork prices will lead to increased profits for breeders," commented Mr. Zhenyu (Jack) Shang, Founder, Chairman and CEO of Sen Yu International Holdings, Inc.

"Sen Yu has a well-established brand and is the leading commercial hog breeder and supplier in Heilongjiang Province. Under our partnership-based business model, this could increase the number of hog farmers that we work with while the increases in average prices of commercial hogs support higher revenue, gross profit and increases in gross margins that we have experienced. Though we expect pork prices to fluctuate over time as increases in supply come into the market, we believe that China's economic expansion and rising middle class with its taste for high quality pork will continue to spur demand for our superior quality breeding and commercial hogs for the long term."